Despite some people loathing CES, I actually happened to enjoy the show this year. I go to CES mostly to meet with our clients, gather data and market intelligence, and search for trends. CES always includes hidden gems; you simply have to know where to look.

Two things stood out to me as major themes at CES this year.

The Internet of Things on Display

We have talked about the concept of the Internet of Things for several years now. The Internet of Things is the idea that the vast majority of our electronics will be connected to the Internet and/or other nearby devices.

A refrigerator, for example, may have a touch screen on the door and be connected to the Internet, allowing you to remotely access information — things like inventory, temperature, whether or not you have what you need to make a certain recipe. Another example is the Nest thermostat, which is a connected thermostat that allows you to remotely manage your thermostat from your smartphone, tablet or PC. The high-level view of the Internet of Things is a world where nearly every electronic device we own will be connected to something.

In years past, this idea was just an idea — something we said was coming. This year, however, was the first year when I could actually say the Internet of Things was on display. I saw examples of nearly every type of electronics device — from coffee makers, ovens, fridges, cars, clocks, stereos, exercise equipment, and my personal favorite: an LED lightbulb with a wireless speaker built in. All of these devices were connected to the Internet and allowed you to interact with them, store data, access data and more. This was the first year I could see the Internet of Things becoming reality, and it is very exciting for us industry observers.

I’m half-joking but I can’t wait for the year when we see a connected toilet and companion app.

Hardware with Software Accessories

The reality of the Internet of Things coming to fruition brings with it perhaps one of the most interesting developments: the role of software. What become increasingly evident with all the connected devices I saw and played with at CES was that nearly all of them were made significantly more usable and valuable through the use of companion apps for smartphones or tablets.

Some I have spoken with position devices such as connected watches or even the Nest thermostat as accessories to your smartphone. The logic is that because your smartphone is the terminal that all these devices leverage to really make them smart, then the phone must have the more important role. This is true to some degree, because there is no point of having all these connected devices if the experiences are limited to the hardware itself. However, I would still position the hardware as the stand-alone device adding value, while the app on your smartphone is actually the accessory.

At CES, this hardware-software model was on full display in the area of smart health and personal sensors. I wrote a column on this subject last year, and I believe the smart health industry is about to launch into the stratosphere if this year’s CES was any indication. On the show floor, the pavilion for the smart/connected health area was the biggest I have ever seen it: Several dozen vendors were there showing off the latest in smart health. Every single smart health and body sensor product I got a demo of or gathered info on had a companion app that ran on a smartphone, making the hardware more than just hardware.

This is the world we are headed toward. Because of the unrivaled momentum and rapid worldwide adoption of devices like smartphones and tablets, we have smart devices with us at all times. They perfectly function as the platform to drive the interaction with the hardware around us.

All hardware will be made smarter through not just the use of connected chipsets and next-generation parts, but rather through the applications that add to their value.

Bajarin is a principal at Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to the Big Picture opinion column that appears here every week.

Among the most prospective vertical application domains are consumer electronics, automotive, and healthcare, as well as intelligent buildings and utilities.

As predicted by Many top research firms like Gartner and IDC, that by 2020 IoT will be connecting around 212 billion devices. Now that's a huge number. Also supplementing this trend is the emergence of the Tech triad- Cloud, Mobile & Big Data.

With so many devices, It will be interesting to know which organizations are driving this forward in terms of building platforms, products. Also the role software vendors would play in this huge ecosystem.

Following up on this, I came across and registered for a webinar on Internet of Things- Driving the Next Decade http://j.mp/1lvIuQC

Ben – I’m glad to see your eye-witness account of the Internet of Things trend truly becoming a reality this year at CES. There’s no question that the number of connected devices is skyrocketing. My two cents on the software side of things – the software included with the devices is adding great value, not only through what the applications can do, but also through what the software can control.The embedded software can control what features are available in the device at many points in its life -- when you see it demonstrated, when you buy it at a certain price point, when it is installed, when you want to update/upgrade/add to it, and when you want to resell it or dispose of it.This use of embedded software for licensing and entitlement management provides benefits to the consumer in the form of payment and access to just the features they need, but also to the manufacturers who are able to create fewer models (lowering manufacturing costs) while at the same time offering connected devices that can be tailored to the needs within target geographies and markets. This is changing the face of manufacturing as we’re already seeing and you just saw firsthand – in the latest generation of thermostats, refrigerators, medical test units, automobiles, etc. I look forward to your continued coverage of this trend! – Steve Schmidt, Vice President of Corporate Development, Flexera Software

Nice article and I look forward to playing or really using some of this tech. However I found an example of really lame here (not the authors fault). Following the Lightspeaker link I read about it and clicked the "buy now" button. That goes to a page that has links to where you can buy the things in different countries.

Clicking the "Currently available in the United States" link goes to a page that says "This product is no longer available". Clicking the "Contact Us" button on LightSpeakers page only reloads the buy now page.